CINEPLEX GALAXY INCOME FUND Reports Record First Quarter Results

Transcription

1 Not for release over US newswire services FOR IMMEDIATE RELEASE CINEPLEX GALAXY INCOME FUND Reports Record Results TORONTO, CANADA, May 8, 2009 (TSX: CGX.UN) (the Fund ) today released its financial results for the first quarter of Q Q Year over Year Change Total Revenues $211.0 million $189.8 million +11.2% Attendance 16.0 million 14.6 million +9.0% Other Revenue $17.6 million $16.3 million +8.1% Net Income (Loss) $3.7 million $(2.3) million NM Adjusted EBITDA $29.9 million $25.1 million +19.2% Adjusted EBITDA Margin 14.2% 13.2% +7.6% Distributable Cash Per Unit $0.381 $0.328 Period over period change calculated based on thousands of dollars except percentage and per unit values % NM = Not meaningful. We begin 2009 with record-setting first quarter results, said Ellis Jacob, President and CEO, Cineplex Entertainment. We achieved our best ever first quarter results in attendance, box office, concession, other and total revenues which resulted in record EBITDA of $29.9 million, 19.2% better than the first quarter of In addition, distributable cash per unit increased 16.2% to $0.381 versus last year, Jacob said. Cineplex continues to perform well during these difficult economic times, said Jacob. Given the challenges with the current economy, we are happy to provide our guests with an affordable escape. These record results in concession revenue and concession revenue per patron amounts are compelling especially when compared against the same period in the previous year which included more children s films that tend to be more concession-friendly, said Jacob. We are also pleased to advise that our SCENE program now exceeds 1.6 million members and continues to grow each week. EBITDA and distributable cash are not measures recognized by generally accepted accounting principles ( GAAP ) and do not have standardized meanings in accordance with such principles. Therefore, EBITDA and distributable cash may not be comparable to similar measures presented by other issuers. EBITDA is calculated by adding back to net income, income tax expense, amortization and interest expense net of interest income. Adjusted EBITDA is calculated by adjusting EBITDA for non-controlling interests and gains or losses on disposal of theatre assets. Distributable cash is a non-gaap measure generally used in Canadian open-ended trusts, as an indicator of financial performance and it should not be seen as a measure of liquidity or a substitute for comparable metrics prepared in accordance with GAAP. Management uses adjusted EBITDA and distributable cash to evaluate performance primarily because of the significant effect certain unusual or non-recurring charges and other items have on EBITDA from period to period. For a detailed reconciliation of net income to EBITDA and adjusted EBITDA and from cash used in operating activities to distributable cash, please refer to Cineplex s management s discussion and analysis filed on Results Presentation of Results. Prior to Q1 2009, Cineplex presented and discussed the results of Cineplex Entertainment Limited Partnership (the Partnership ) as the Fund equity accounted for its investment in the Partnership prior to Q and, as such, the consolidated financial statements of the Fund did not provide comparative results on a line-byline basis. As a result of the Fund s step acquisitions in the Partnership, there are differences in the valuation bases of certain assets and liabilities between the Fund and the Partnership. These valuation differences give rise to differences in certain non-cash expenses (primarily included in the occupancy category) which result in differences in reported results between the Fund and the Partnership. In its filed Management s Discussion and Analysis, the Fund provides a reconciliation of the Fund and the Partnership reported results. For Q1 2009, the Fund reported Adjusted EBITDA of $29.9 million, an increase of 19.2% over the prior year s amount of $25.1 million. For Q1 2009, the Partnership reported Adjusted EBITDA of $31.1 million an increase of 18.9% over the prior year s amount of $26.2 million.

2 The results of the Fund for the three months ended March 31, 2009 as compared to the three months ended March 31, 2008 are presented below. Total revenues for the three months ended March 31, 2009 increased $21.2 million to $211.0 million. A discussion of the factors affecting the changes in box office, concession and other revenues for the first quarter of 2009 compared to the first quarter of 2008 is provided below. Box office revenues. The following table highlights the movement in box office revenues, attendance and box office revenues per patron ( BPP ) for the quarter (in thousands of dollars, except attendance and per patron data): Box office revenues Box office revenues $130,277 $ 116, % Attendance 15,966 14, % Box office revenue per patron $ 8.16 $ % Canadian industry revenues (1) 7.2% (1) Source: Motion Picture Theatre Associations of Canada Box office continuity In thousands Box Office Attendance 2008 as reported $ 116,823 14,645 Same store attendance 8,826 1,101 Same store BPP change 1,965 - New and acquired theatres 3, Disposed and closed theatres (1,126) (216) 2009 as reported $130,277 15,966 Top Cineplex Films 2009 compared to 2008 Q Top Cineplex Films % Total Box Q Top Cineplex Films % Total Box 1 Paul Blart: Mall Cop 5.4% 1 Juno 5.8% 2 Slumdog Millionaire 5.1% 2 Dr. Seuss Horton Hears a Who! 4.1% 3 He s Just Not That Into You 4.8% 3 10,000 B.C. 4.1% 4 Watchmen 4.6% 4 27 Dresses 3.8% 5 Taken 4.2% 5 Jumper 3.5% The Fund reported its highest-ever first quarter box office revenues in 2009 in spite of the general economic downturn. Box office revenues for the quarter were up compared to the prior year, driven by the consistently strong film performance across the first three months of Paul Blart: Mall Cop outperformed expectations to be Cineplex s top film of the quarter, and Slumdog Millionaire leveraged its eight Oscar wins into strong box office results. He s Just Not That Into You performed well during the Valentine s Day period, and Watchmen catered to the action/adventure crowd. This strong film product led to a 9% increase in attendance, and an 11.5% increase in box office revenues period over period. The Canadian exhibition industry reported a box office increase of 7.2% for the period from January 2, 2009 to April 2, 2009 as compared to the period from December 28, 2007 to March 27, On a basis consistent with the Fund s calendar reporting period (January 1st to March 31st), it is estimated that Canadian industry box office would show an increase similar to that reported by the Fund. Box office revenue per patron increased $0.18 from $7.98 in the first quarter of 2008 to $8.16 in the first quarter of 2009 due to the film slate catering to mature audiences. In addition, the success of 3D films such as Coraline, Monsters vs. Aliens, My Bloody Valentine and the Jonas Brothers: The 3D Concert Experience, as well for IMAX releases such as Watchmen and The Day the Earth Stood Still increased the Fund s overall box office revenue per patron, as these films attract a premium over regular ticket prices. Select ticket price increases implemented in November 2008 also contributed to this increase.

3 Concession revenues. The following table highlights the movement in concession revenues, attendance and box office revenues per patron for the quarter (in thousands of dollars, except per patron amounts): Concession revenues Concession revenues $ 63,126 $ 56, % Attendance 15,966 14, % Concession revenue per patron $ 3.95 $ % Concession revenue continuity In thousands Concession Attendance 2008 as reported $ 56,721 14,645 Same store attendance 4,265 1,101 Same store CPP change 1,006 - New and acquired theatres 1, Disposed and closed theatres (797) (216) 2009 as reported $ 63,126 15,966 Concession revenues increased 11.3% as compared to the prior period, driven by the 9.0% increase in attendance and a $0.08 increase in the average concession revenue per patron, which increased from $3.87 in the first quarter of 2008 to $3.95 in the first quarter of This increase in per-patron spending occurred despite the quarter lacking a major release targeted at the family demographic, who tend to be higher concession spenders. Selected price increases implemented in the second quarter of 2008 contributed to this increase. Management believes that concession revenues will continue to be dependent on overall theatre attendance and that the current economic conditions will not have a material impact on concession revenues. Other revenues. The following table highlights the movement in media, games and other revenues for the quarter (in thousands of dollars): Other revenues Media $ 10,622 $ 10, % Games 1,168 1, % Other 5,828 4, % Total $ 17,618 $ 16, % During the first quarter of 2009, media revenue increased $0.2 million to $10.6 million. This $0.2 million increase was comprised of a $2.2 million increase in non-cash barter revenue offset by a $2.0 million reduction in cash-settled media revenue. Rather than settling cash-based transactions, during 2008 the Fund entered into a number of crosspromotional non-cash barter agreements with certain promotional partners to provide radio and television promotions to the Fund s business initiatives. During the first quarter of 2009 the Fund recognized $2.2 million in media revenue and an additional $1.7 million in marketing costs related to these transactions. Games revenues were down period over period, primarily due to the film slate featuring strong performances from award-nominated films such as Slumdog Millionaire, Gran Torino, and The Curious Case of Benjamin Button, which tend to appeal to customers who are not frequent game players. Other revenues were up primarily due to higher breakage revenues associated with increased sales of gift cards and corporate coupons.

4 Film cost. The following table highlights the movement in film cost and film cost as a percentage of box office revenue ( film cost percentage ) for the quarter (in thousands of dollars, except film cost percentage): Film cost Film cost $ 65,940 $ 58, % Film cost percentage 50.6% 50.4% 0.4% Film cost varies primarily with box office revenue. The quarterly increase was driven by the 11.5% increase in box office revenues. Film cost percentage was up marginally as compared to the prior year, due to the mix of film product during the quarter resulting in a slightly higher film cost percentage. Cost of concessions. The following table highlights the movement in concession cost and concession cost as a percentage of concession revenues ( concession cost percentage ) for the quarter (in thousands of dollars, except concession cost percentage): Cost of concessions Concession cost $ 12,924 $ 11, % Concession cost percentage 20.5% 20.5% 0.0% Cost of concessions varies primarily with theatre attendance as well as the quantity and mix of concession offerings sold. The increase in concession cost period over period was due to the 11.5% increase in attendance. Concession cost percentage remained constant at 20.5% for both the first quarters of 2008 and 2009, in spite of the continued growth of the SCENE loyalty program and the associated 10% discount on concession products. This 10% discount accounted for a 0.2% increase in the concession cost percentage during the first quarter of 2009 as compared to the prior year period. Occupancy expense. The following table highlights the movement in occupancy expenses for the quarter, including non-recurring one-time benefits of lease-related amounts recognized during the period (in thousands of dollars): Occupancy expense Occupancy expenses excluding one-time benefits $ 40,376 $ 40, % One-time benefits (226) (879) -74.3% Occupancy expenses $ 40,150 $ 39, % The $0.8 million increase in occupancy expenses was primarily due to lower one-time benefits of lease-related amounts recognized in 2009 as compared to the prior period ($0.7 million) and the incremental costs associated with new and acquired theatres ($1.1 million), offset by the impact of disposed and closed theatres ($0.5 million) and lower real estate taxes and rent expenses ($0.5 million). Other operating expenses. The following table highlights the movement in other operating expenses during the quarter (expressed in thousands of dollars): Occupancy expense Other operating expenses $ 50,721 $ 45, % Other operating expenses increased $5.5 million due to the incremental impact of new and acquired theatres ($1.3 million), increased theatre payroll driven by minimum wage increases and increased theatre staffing due to higher theatre attendance in the first quarter of 2009 as compared to the same period in 2008 ($1.7 million), additional marketing costs ($1.8 million) primarily arising from the non-cash barter agreements previously discussed, costs related

5 to expanded service offerings such as the elimination of charges for online ticketing and 3D technology licensing payments ($0.8 million) and higher supplies, services and utility costs relating to higher business volumes during the quarter ($1.0 million). These increases were offset by the impact of disposed and closed theatres ($0.6 million) and lower costs relating to the SCENE loyalty program and the Fund s interactive media initiatives ($0.5 million). SCENE costs have decreased slightly from the prior year period as the first quarter of 2008 included higher program marketing costs in addition to the regular operating costs of SCENE. Interactive media costs have decreased as well due to the redevelopment of cineplex.com during the first quarter of General and administrative expenses. The following table highlights the movement in general and administrative ( G&A ) expenses during the quarter, including the Fund s total Long-Term Incentive Plan ( LTIP ) costs, and the net general and administrative costs without factoring in the LTIP program (expressed in thousands of dollars): G&A expenses G&A excluding LTIP $ 8,693 $ 7, % LTIP $ 2,679 $ 1, % G&A costs as reported $ 11,372 $ 9, % General and administrative costs increased $1.8 million as a result of increased costs under the LTIP ($0.8 million) and increased direct costs ($1.0 million). The direct costs increased due to a $0.4 million increase in head office payroll as a result of higher headcount relating to the Fund s new initiatives, higher professional fees ($0.2 million) and other costs ($0.4 million). The Fund has received approval for the proposed wind-up of the Famous Players defined benefit pension plan and estimates that the expense to be recorded on the wind-up will be $1.7 million. The Fund reported income before undernoted ( adjusted EBITDA ) for the three months ended March 31, 2009 of $29.9 million, as compared to income before undernoted of $25.1 million for the prior period. These changes were due to the aggregate effect of the factors described above. Distributable Cash For the three months ended March 31, 2009, distributable cash per Fund unit was $0.381 as compared to $0.328 for the three months ended March 31, The declared distributions per Fund unit for the current period were $0.315 and $0.300 for the same period in The payout ratios were 83% and 91%, respectively, for the three months ended March 31, 2009 and This news release contains forward-looking statements within the meaning of applicable securities laws, such as statements concerning anticipated future events, results, circumstances, performance or expectations that are not historical facts. These statements are not guarantees of future performance and are subject to numerous risks and uncertainties, including those described in our Annual Information Form and in this news release. Those risks and uncertainties include adverse factors generally encountered in the film exhibition industry such as poor film product and unauthorized copying; the risks associated with national and world events, including war, terrorism, international conflicts, natural disasters, extreme weather conditions and infectious diseases; changes in income tax legislation; and general economic conditions. Many of these risks and uncertainties can affect our actual results and could cause our actual results to differ materially from those expressed or implied in any forward-looking statement made by us or on our behalf. All forward-looking statements in this news release are qualified by these cautionary statements. These statements are made as of the date of this news release and, except as required by applicable law, we undertake no obligation to publicly update or revise any forwardlooking statement, whether as a result of new information, future events or otherwise. Additionally, we undertake no obligation to comment on analyses, expectations or statements made by third parties in respect of Cineplex Entertainment, its financial or operating results or its securities. About Cineplex Entertainment LP As the largest motion picture exhibitor in Canada, Cineplex Entertainment LP owns, leases or has a joint-venture interest in 130 theatres with 1,333 screens serving more than 63.5 million guests annually. Headquartered in Toronto, Canada, Cineplex Entertainment operates theatres from British Columbia to Quebec and is the largest exhibitor of digital, 3D and IMAX projection technologies in the country. Proudly Canadian and with a workforce of more than 9,000, the company operates the following top tier brands: Cineplex Odeon, Galaxy, Famous Players, Colossus, Coliseum, SilverCity, Cinema City and Scotiabank Theatres. The units of, which owns approximately 99.5% of Cineplex Entertainment LP, are traded on the Toronto Stock Exchange (symbol CGX.UN). For more information, visit Further information can be found in the disclosure documents filed by the Fund with the Canadian securities regulatory authorities, available at

6 You are cordially invited to participate in a teleconference call with the management of the Partnership (TSX: CGX.UN) to review our quarterly results. Ellis Jacob, Chief Executive Officer and Gord Nelson, Chief Financial Officer, will host the call. The teleconference call is scheduled for: Friday, May 8th, :00 a.m. Eastern Time In order to participate in the conference call, please dial (416) or outside of Toronto dial at least five to ten minutes prior to 10:00 a.m. Eastern Time. If you cannot participate in the live mode, a replay will be available. Please dial or and enter code #. The replay will begin at 12:00 p.m. Eastern Time on Friday, May 8th, 2009 and end at 11:59 p.m. Eastern Time on Friday, May 15th, Note that media will be participating in the call in listen only mode. Thank you in advance for your interest and participation For further information: Gord Nelson Pat Marshall Chief Financial Officer Vice President Communications and Investor Relations (416) (416)

7 Interim Consolidated Supplemental Information (Unaudited) (expressed in thousands of Canadian dollars) Reconciliation to Adjusted EBITDA Three months ended March 31, Net income (loss) $ 3,703 $ (2,255) Amortization 20,864 21,102 Interest and accretion expense on convertible debentures 1,836 1,840 Interest on long-term debt and capital lease obligations 4,214 4,589 Interest income (125) (297) Provision for (recovery of) income taxes (730) 1,532 EBITDA 29,762 26,511 Non-controlling interests 157 (1,732) (Gain) loss on disposal of theatre assets (5) 311 Adjusted EBITDA $ 29,914 $ 25,090

8 Interim Consolidated Supplemental Information (Unaudited) (expressed in thousands of Canadian dollars, except number of units and per unit data) Distributable Cash For the three months ended March 31, Cash provided by operating activities $ 18,557 $ 8,791 Less: Total capital expenditures (12,557) (7,817) Standardized distributable cash 6, Less: Changes in operating assets and liabilities (i) 10,381 13,171 Tenant inducements (ii) (4,560) (1,818) Principal component of capital lease obligations (413) (384) Add: New build capital expenditures and other (iii) 10,542 6,983 Non-cash components in operating assets and liabilities (iv) (167) (162) Distributable cash $ 21,783 $ 18,764 Less: Non-controlling interests share of distributable cash (870) (4,549) Distributable cash available to Fund unitholders $ 20,913 $ 14,215 Average number of Fund units outstanding 54,867,332 43,295,326 Distributable cash per Fund unit $ $ (i) (ii) (iii) (iv) Changes in operating assets and liabilities are not considered a source or use of distributable cash. Tenant inducements received are for the purpose of funding new theatre capital expenditures and are not considered a source of distributable cash. New build capital expenditures and other represent expenditures on Board approved projects as well as any expenditures for digital equipment anticipated to be reimbursed by a third-party digital integrator, and exclude maintenance capital expenditures. The Partnership s revolving credit facility is available to the Fund for use to fund Board approved projects. Certain non-cash components of other assets and liabilities are indirectly excluded from distributable cash to the extent they reflect permanent, not timing differences. Such items include the amortization of deferred gains on sale-leaseback transactions and non-cash pension adjustments relating to the Fund s acquisition of the Partnership.

9 Interim Consolidated Balance Sheets (expressed in thousands of Canadian dollars) Assets March 31, December 31, (unaudited) Current assets Cash and cash equivalents $ 23,414 $ 44,585 Accounts receivable 23,117 45,507 Inventories 2,866 4,014 Prepaid expenses and other current assets 6,743 3,733 56,140 97,839 Property, equipment and leaseholds 448, ,885 Future income taxes 17,366 13,099 Deferred charges Intangible assets 114, ,476 Goodwill 600, ,564 $ 1,237,941 $ 1,285,816

10 Interim Consolidated Balance Sheets continued (expressed in thousands of Canadian dollars) Liabilities March 31, December 31, (unaudited) Current liabilities Accounts payable and accrued expenses $ 62,895 $ 86,140 Distributions payable 6,001 6,001 Income taxes payable Deferred revenue 61,446 76,929 Capital lease obligations - current portion 1,772 1, , ,818 Long-term debt 233, ,861 Fair value of interest rate swap agreements 21,504 20,628 Capital lease obligations long-term portion 32,646 33,131 Accrued pension benefit liability 1, Other liabilities 110, ,380 Convertible debentures - liability component 100,099 99, , ,584 Non-controlling interests 18, ,860 Unitholders' equity 588, ,372 $ 1,237,941 $ 1,285,816

11 Interim Consolidated Statements of Operations (Unaudited) (expressed in thousands of Canadian dollars) Three months Three months ended ended March 31, March 31, Revenues Box office $ 130,277 $ 116,823 Concessions 63,126 56,721 Other 17,618 16, , ,841 Expenses Film cost 65,940 58,932 Cost of concessions 12,924 11,653 Occupancy 40,150 39,347 Other operating 50,721 45,252 General and administrative 11,372 9, , ,751 Income before undernoted 29,914 25,090 Amortization 20,864 21,102 (Gain) loss on disposal of theatre assets (5) 311 Interest and accretion expense on convertible debentures 1,836 1,840 Interest on long-term debt and capital lease obligations 4,214 4,589 Interest income (125) (297) Income (loss) before income taxes and noncontrolling interests 3,130 (2,455) Provision for (recovery of) income taxes Current 7 (5) Future (737) 1,537 (730) 1,532 Income (loss) before non-controlling interests 3,860 (3,987) Non-controlling interests 157 (1,732) Net income (loss) $ 3,703 $ (2,255)

12 Interim Consolidated Statements of Unitholders Equity and Comprehensive Income (Loss) (Unaudited) (expressed in thousands of Canadian dollars) For the three months ended March 31, 2009 Accumulated income Accumulated distributions Accumulated distributions in excess of accumulated income Accumulated other comprehensive loss Unitholders' capital Total Unitholders' equity Comprehensive income Balance - December 31, 2008 $ 102,535 $ (190,881) $ (88,346) $ (13,683) $ 571,401 $ 469,372 $ - Issuance of units under exchange agreement , ,403 - LTIP compensation obligation ,068 1,068 - LTIP fund units (2,912) (2,912) - Distributions declared - (17,451) (17,451) - - (17,451) - Net income 3,703-3, ,703 3,703 Other comprehensive income - interest rate swap agreements Comprehensive income for the period $ 3,926 Balance March 31, 2009 $ 106,238 $ (208,332) $ (102,094) $ (13,460) $ 703,960 $ 588,406 The sum of the accumulated distributions in excess of accumulated income and accumulated other comprehensive loss as at March 31, 2009 is $115,554. For the three months ended March 31, 2008 Accumulated income Accumulated distributions Accumulated distributions in excess of accumulated income Accumulated other comprehensive income (loss) Unitholders' capital Total Unitholders' equity Comprehensive loss Balance - December 31, 2007 $ 73,532 $ (137,082) $ (63,550) $ 290 $ 570,728 $ 507,468 $ - Issuance of units under exchange agreement ,139 2,139 - LTIP compensation obligation ,084 1,084 - LTIP fund units (3,691) (3,691) - Distributions declared - (12,989) (12,989) - - (12,989) - Net loss (2,255) - (2,255) - - (2,255) (2,255) Other comprehensive loss - interest rate swap agreements (2,051) - (2,051) (2,051) Comprehensive loss for the period $ (4,306) Balance March 31, 2008 $ 71,277 $ (150,071) $ (78,794) $ (1,761) $ 570,260 $ 489,705 The sum of the accumulated distributions in excess of accumulated income and accumulated other comprehensive loss as at March 31, 2008 is $80,555.

13 Interim Consolidated Statements of Cash Flows (Unaudited) (expressed in thousands of Canadian dollars) Three months Three months ended ended March 31, March 31, Cash provided by (used in) Operating activities Net income (loss) $ 3,703 $ (2,255) Adjustments to reconcile net income (loss) to net cash provided by operating activities Amortization of property, equipment and leaseholds, deferred charges and intangible assets 20,864 21,102 Amortization of tenant inducements, rent averaging liabilities and fair value lease contract liabilities (28) 269 Amortization of debt issuance costs (Gain) loss on disposal of theatre assets (5) 311 Future income taxes (737) 1,537 Cash flow hedges - non-cash interest Non-controlling interests 157 (1,732) Accretion of convertible debentures Tenant inducements 4,560 1,818 Changes in operating assets and liabilities (10,381) (13,171) 18,557 8,791 Investing activities Proceeds from sale of theatre assets - 1,658 Purchases of property, equipment and leaseholds (12,557) (7,817) Cash acquired in exchanges of LP units Acquisition of Famous branded magazines (231) (387) (12,149) (6,546) Financing activities Distributions paid (16,193) (12,972) Borrowings under credit facility 18,000 - Repayment of credit facility (18,000) - Distributions paid by the Partnership to non-controlling interests (1,810) (4,173) Acquisition of LTIP fund units (9,163) (6,887) Payments under capital leases (413) (384) (27,579) (24,416) Decrease in cash and cash equivalents during the period (21,171) (22,171) Cash and cash equivalents - Beginning of period 44,585 44,254 Cash and cash equivalents - End of year $ 23,414 $ 22,083 Supplemental Information Cash paid for interest $ 2,777 $ 3,425 Cash paid for income taxes - net 5 - Cash received for interest